Markets rise on hopes for US growth, earnings

A currency trader stretches in front of the Korea Composite Stock Price Index (Kospi), left, and the exchange rate between the U.S. dollar and South Korean won at the Korea Exchange Bank headquarters in Seoul, South Korea, Tuesday, Jan. 10, 2012. Asian stocks rose Tuesday, tracking slight gains on

/ AP

A currency trader stretches in front of the Korea Composite Stock Price Index (Kospi), left, and the exchange rate between the U.S. dollar and South Korean won at the Korea Exchange Bank headquarters in Seoul, South Korea, Tuesday, Jan. 10, 2012. Asian stocks rose Tuesday, tracking slight gains on Wall Street and assisted by an absence of bad financial news. South Korea's Kospi rose 1.46 percent, or 26.73 points, to close at 1,853.22. (AP Photo/Ahn Young-joon)

A currency trader stretches in front of the Korea Composite Stock Price Index (Kospi), left, and the exchange rate between the U.S. dollar and South Korean won at the Korea Exchange Bank headquarters in Seoul, South Korea, Tuesday, Jan. 10, 2012. Asian stocks rose Tuesday, tracking slight gains on Wall Street and assisted by an absence of bad financial news. South Korea's Kospi rose 1.46 percent, or 26.73 points, to close at 1,853.22. (AP Photo/Ahn Young-joon) (/ AP)

GREG KELLER, AP Business Writer

Stock markets rose strongly Tuesday after another big advance in China and as investors hoped for strong corporate earnings from the U.S. and looked to a new round of talks in Berlin for progress in solving Europe's debt crisis.

The U.S. economy has shown new signs of strength recently, and investors are hoping that will boost corporate earnings results due to be announced in coming weeks. In particular, signs that the U.S. labor market is improving has raised the possibility of a recovery in American consumer spending, one of the main motors of global economic growth.

In Europe, Britain's FTSE 100 index of leading shares was up 1.4 percent at 5,693 while Germany's DAX rose 2.3 percent to 6,153. France's CAC-40 was 2.3 percent higher at 3,201. Italy's main market outperformed its peers, trading 3 percent higher as the country's biggest bank UniCredit recouped some lost ground.

The euro was also fairly well-supported, especially in comparison to last week, trading just below the $1.28 mark. On Monday it had fallen to a 16-month low of $1.2676.

In the U.S., the Dow Jones industrial average opened strongly, trading 0.7 percent higher at 12,482 while the broader Standard & Poor's 500 futures rose 0.9 percent to 1,292.

Over the coming days, attention is shifting to the U.S. corporate earnings results season, which kicked off, as is traditional, with numbers from aluminum producer Alcoa Inc. The statement encouraged investors as revenues topped expectations and the company suggested the global economy was improving.

"Alcoa posted positive results also helping the positive market sentiment, providing optimism ahead of the US reporting season," said Simon Furlong, a trader at Spreadex.

There was less good corporate news in Europe, where Dutch electronics giant Royal Philips Electronics NV warned that its fourth quarter profits were worse than expected due to a weak European market that made it difficult to charge customers as much as it wanted to for light bulbs. Philips shares fell 6 percent to euro14.715 in early trading in Amsterdam.

Despite the resilience in markets, sentiment remains fragile in light of ongoing worries in Europe ahead of a meeting later between the International Monetary Fund's head Christine Lagarde is due to meet German Chancellor Angela Merkel later this evening. Debt-crippled Greece is expected to be a major point of the discussions.

Neil MacKinnon, global macro strategist at VTB Capital, said "uncertainties" over the European debt crisis as policymakers struggle to come up with "credible policy moves" will continue to weigh on sentiment.

Fitch Ratings warned that a number of euro countries, including Italy, could see their credit ratings downgraded by the end of this month as they struggle to cope with too much debt and slowing economic growth. However, it gave no indication that France would be downgraded anytime in 2012, a relief to investors.

Meanwhile, the Bank of Portugal said it expects the bailed-out country's recession to deepen this year under the weight of austerity measures meant to reduce public debt. Portugal went into a double-dip recession last year and the jobless rate has climbed to a record 13.2 percent.

Further signs of stress emerged with figures showing that the amount of overnight deposits that the region's banks held with the European Central Bank swelled to euro481.9 billion ($613 billion) on Monday, breaking the record euro463.6 billion set only a day before.

The high deposits mean banks are keeping spare cash in a safe place even though they earn low interest. They also reflect large amounts of cash put into the banking system from ECB emergency loans of euro489 billion taken up by more than 500 banks in late December.

For the second day running, Chinese shares raced ahead as investors continued to cheer Premier Wen Jiabao's promise last weekend to channel lending to entrepreneurs who have been battered by weak global demand.

Figures showing a fall in Chinese imports in November, admittedly after two months of relative strength, also reinforced market expectations that the Chinese monetary authorities will do more to shore up a slowing economy.

"We expect policy stimulus to help the economy turn around by the middle of the year and for China still to grow 8.5 percent in 2012," said Mark Williams, chief Asia economist at Capital Economics.